The credit card industry is sheepishly hiding behind many secrets that help to make it one of the most profitable industries in our country today. Below are ten secrets every consumer should know before entering into an agreement with a credit card company.
1. Cash Advance Fees
Almost all credit card companies charge a transaction fee as well as finance charges for all cash advances a client may receive. Transaction fees are known to be as high as 2.5% of the cash advance. Keep in mind that the interest is charged from the day the advance takes place.
2. Introductory "Teaser" Rates
Watch out for the all too common introductory or teaser rates most credit card companies will offer you. While you may receive an enticing offer with a low rate this is probably not in your best interest. Reason being, once the low rate introductory period ends, you may be subject to a much higher rate on the items purchased at the original introductory rate. This is when the creditors begin to reap the benefits of the low rate offer.
3. Interest Backdating
This occurs when a creditor charges you interest from the day you purchase an item with their credit card. The problem with this scenario is the creditor is charging you interest when they have not even paid the vendor on your behalf.
4. Right to "Offset" or "Setoff"
Most consumers do not realize that when they have a personal bank account and also a credit card with the same bank that they may be subject to "offsetting" or "setoff" if they default on the credit card. In short, the bank may be able to deduct funds from your personal bank account and apply it toward the delinquent credit card. Read the fine print when your bank asks you "would you also like to apply for our credit card".
5. Shortened Due Dates
Many banks have shortened the grace period from 25 days to 20 days. This is usually for clients who pay their entire bill every month. If you are in this category ask for a 25 day grace period.
6. Two Cycle Billing
If you have neglected to pay your monthly bill in full and resort to carrying a balance from month to month you may be subject to "two cycle billing". With this type of interest calculation the creditor will charge you two months worth of interest for the first month that you did not fully pay your balance.
7. Late and Over-limit Fees
Both late fees and over-limit fees have steadily increased over the past 10 years. Late fees are usually assessed at $39 each time you are past due on your credit card accounts. Some companies have enacted cut-off times during the day for when the payment can be received without being charged a late fee. This makes it easier for the credit card company to justify a late fee. As for the over-limit fee it to is usually set at $39 each time your credit card goes over the given credit limit. All too often consumers are finding out that their late fee has caused the account to go over the credit limit. This is equal to $79, but do not forget that the creditor is also going to impose a finance charge-which is set at their discretion.
8. Erroneous Interest "Usury" Rates
Most consumers have no idea that credit card companies located in both Delaware and South Dakota are free to charge the rate they best see fit. This is because the respective legislature in both states eliminated the cap on interest "usury" rates in the 1980's. It is a no brainer why most credit card companies are located in one of these states. Now it should make sense why some consumers are assessed as much as 40% APR and some even higher.
9. Benefits? I thought I had some.
Buyer beware...the at "one-time" well known benefits offered by most credit card companies are diminishing or are all together disappearing from those supposedly great credit card offers received in the mail.
10. Minimum notice change
The creditors have devised a method of including clauses in their clients' contracts that allow them to adjust your interest rate for any reason, and at anytime. The only condition is that they must give the customer 15 days notice. If you make a purchase at 5% interest they can go back and change the rate. Can you imagine if other industries where allowed to engage in this deceptive practice?
